An opinion by U.S. Magistrate Frank Maas in the U.S. Southern District of New York may be a harbinger of how courts will evaluate spoliation cases in the coming years. In this case, whereas the plaintiff was found to be negligent with respect to actions to preserve relevant data, Judge Maas concluded the defendants failed to demonstrate prejudice, and the requested adverse inference sanction was not warranted. Interestingly, Judge Maas makes reference in a footnote to the proposed amendment to the FRCP Rule 37(e) when upholding the Orbit One standard in which prejudice must be shown.
The origin of Sekisui Am. Corp. v. Hart, No. 12 Civ. 3479(SAS)(FM), 2013 WL 2951924 (S.D.N.Y. June 10, 2013) was from a failed acquisition in 2009 by Sekisui of American Diagnostics, Inc. (ADI) of which a married couple, the Harts, had controlling interest. In October 2010, Sekisui fired the Harts and alerted them that the company would try to recover damages for breach of contract. However, Sekisui “failed to implement a litigation hold until January 31, 2012, more than fifteen months later.” (*2) Furthermore, the company failed to notify a vendor overseeing its IT operations to preserve email for the Harts which was subsequently lost. Fortunately, once Sekisui’s counsel became aware of the situation, he found alternate sources for many of the lost emails.
In this case, the court concluded that the defendants had not made the showing necessary to secure an adverse inference instruction. The court observed that:
To secure an adverse inference instruction based on the spoliation of evidence, a party must establish that (a) the party having control over the evidence had an obligation to preserve it; (b) the records were destroyed with a “culpable state of mind;” and (c) the destroyed evidence was “relevant” to the moving party’s claim or defense, “such that a reasonable trier of fact could find that it would support that claim or defense.” Chin v. Port Auth. of N.Y. & N.J., 685 F.3d 135, 162 (2d Cir.2012) (*3)
Judge Maas found Sekisui clearly wanting regarding the first and second points:
Nonetheless, because Sekisui failed to implement a litigation hold, [the outside IT vendor] was able to delete the entire active email folder of an important witness—perhaps the key witness—at a time when Sekisui obviously knew that it might commence a lawsuit seeking substantial monetary damages. This may well rise to the level of gross negligence. The mere fact that Sekisui acted with a culpable state of mind, however, does not by itself entitle the Hart Defendants to sanctions. The Hart Defendants must also show the emails were relevant, see Residential Funding, and, more fundamentally, that they suffered prejudice. Orbit One Commc’ns, 271 F.R.D. at 431
Despite the possibility of the spoliation rising to the standard of gross negligence, the court took into account Sekisui’s efforts to correct the problem. The defendants could not show that any prejudicial evidence was lost as a result of the spoliation; although the court left the door open should they prove otherwise.
It is unclear of how broadly the ruling out of the influential Southern District of New York can apply since Judge Maas was measuring the spoliation solely by the standard needed to hand out an adverse inference sanction. If seeking less specific sanctions, perhaps the outcome would have been different.
- No Sanctions for Deletion of Email Folder belonging to “Perhaps the Key Witness” Absent Evidence of Prejudice, E-Discovery Law Blog, K&L Gates, July 3, 2013
- Full opinion of Sekisui Am. Corp. v. Hart, No. 12 Civ. 3479(SAS)(FM), 2013 WL 2951924 (S.D.N.Y. June 10, 2013).